Garry Honey says Britain’s regulators have often fallen short, but what’s that mean for business?
Ten years after problems at Equitable Life we are told that the regulator was culpable and compensation is due to many policyholders (See FT.com: A fair result for Equitable Life). If these findings had been available last summer could Northern Rock have been avoided? In both cases the regulator has been found wanting and the taxpayer will foot the bill, but who cares about the reputation of our regulators?
Politically there will be a lot of noise along the lines: ‘regulators are supposed to spot fraud, it is not really their job to spot poor management or unrealistic business plans’. What exactly are they supposed to regulate? Treating Customers Fairly (TCF) sounds great but what does it really amount to? The UK economy needs London as a heavyweight financial centre and the political reality is that we don’t really want to threaten this valuable contribution to UK plc.
Markets always prefer minimal political interference and light regulation in order to attract business, especially overseas business which helps cement power as a centre of commerce. Strict regulation drives away business as the US found with Sarbanes-Oxley. If you operate globally it makes commercial sense to keep overheads low where possible. Why is so much shipping registered in Liberia? Why so many investment funds in the Cayman Islands or Guernsey? A benign regulatory regime attracts business.
“The reputation of the UK as a place to business is more important than its reputation as a standard bearer.
If proof were needed look at the way the SFO is being repositioned in the light of a heavily critical review. It claims to no longer see itself prosecuting high profile cases, perhaps smarting from the reality of being called off the Saudi enquiry by Tony Blair - ethics or jobs? Never a difficult choice for a politician. We should recognise that our regulators are compromised by their political masters mindful of the wider economy. The reputation of the UK as a place to business is more important than its reputation as a standard bearer.
Garry Honey is founder of the reputation risk consultancy Chiron www.chiron.uk.net